On 10 July 2025, the UK government made a significant change to the Proceeds of Crime Act 2002 (POCA) by increasing the threshold for two key exemptions from £1,000 to £3,000. The change, enacted through the Proceeds of Crime (Money Laundering) (Threshold Amount) (Amendment) Order 2025, came into force on 31 July 2025 [1].
This update is part of a broader effort to streamline the Suspicious Activity Reports (SAR) regime, allowing law enforcement and AML supervisors to focus on higher-value, higher-risk cases. For small law firms and sole solicitors, this change affects how you handle low-value transactions and client money returns, particularly in the context of Defence Against Money Laundering (DAML) SARs.
What Has Changed?
The amendment increases the threshold for two specific exemptions under section 339A of POCA:
1. Account Operation Exemption
This exemption applies to deposit-taking bodies, electronic money institutions, and payment institutions. It allows these entities to carry out transactions (e.g. paying expenses) in the operation of a customer’s account without committing a money laundering offence, provided the value of the transaction is below the threshold.
- Old threshold: £1,000
- New threshold: £3,000
2. Client Money Return Exemption
This exemption applies to businesses in the AML-regulated sector, including law firms. It allows a firm to return money or property to a client when ending a business relationship without submitting a DAML SAR, provided the value is below the threshold.
- Old threshold: £1,000
- New threshold: £3,000
Why the Change Matters
The goal of the threshold increase is to reduce the volume of low-value SARs, which can overwhelm law enforcement and delay responses to more serious threats. According to the Home Office, the change will:
- Improve the efficiency of the SAR regime
- Reduce regulatory burden on firms
- Focus resources on higher-risk transactions
For small law firms and sole solicitors, this means fewer DAML SARs for low-value client money returns and greater clarity when handling routine transactions.
Implications for Small Law Firms and Sole Solicitors
Reduced DAML SAR Burden
If your firm is ending a relationship with a client and returning funds under £3,000, you are no longer required to submit a DAML SAR, even if the funds may be criminal property.
Action point: Update your AML procedures to reflect the new threshold. Ensure staff understand when a DAML SAR is required and when it is not.
Greater Flexibility in Client Account Management
While law firms are not deposit-taking bodies, many operate client accounts and may be involved in transactions that resemble account operation. The increased threshold provides more flexibility in managing low-value payments, such as disbursements or refunds.
Action point: Review your client account policies. Ensure that transactions under £3,000 are properly documented and justified, even if a SAR is not required.
Continued Obligation to Report Suspicious Activity
It’s important to note that the threshold change does not remove the obligation to report suspicious activity. If you suspect that funds are the proceeds of crime, and the transaction exceeds £3,000—or falls outside the exemptions—you must still submit a DAML SAR.
Action point: Train staff to recognise suspicious activity and understand the reporting thresholds. Use case studies to illustrate common scenarios.
Practical Scenarios
Scenario 1: Returning Client Funds
Your firm is ending a relationship with a client and returning £2,500. You suspect the funds may be linked to criminal activity.
- Old rule: Submit a DAML SAR before returning the funds.
- New rule: No DAML SAR required under the exemption.
Scenario 2: Paying Disbursements
You are paying £2,800 in disbursements from a client account. The transaction is routine and not suspicious.
- Old rule: Risk of triggering a money laundering offence if the funds are criminal property.
- New rule: Exemption applies; no offence committed if below £3,000.
Scenario 3: High-Value Transaction
You are returning £4,500 to a client and suspect the funds may be criminal property.
- Rule: DAML SAR is required. The exemption does not apply.
Updating Your AML Framework
Revise Your AML Manual
Include the new £3,000 threshold in your policies. Clarify when exemptions apply and when reporting is mandatory.
Update Risk Assessments
Your firm-wide risk assessment (FWRA) and client and matter risk assessments (CMRAs) should reflect the threshold change. Consider how it affects your exposure to money laundering risk.
Train Your Team
Provide training on:
- The new POCA thresholds
- When to submit a DAML SAR
- How to document decisions
Use real-world examples to reinforce learning.
Monitor Regulatory Guidance
The Solicitors Regulation Authority (SRA) and National Crime Agency (NCA) may issue further guidance on how the threshold change affects legal practices. Stay informed and adjust your procedures accordingly.
Final Thoughts
The increase in POCA thresholds from £1,000 to £3,000 is a welcome development for the legal sector. It reduces unnecessary reporting, streamlines compliance, and allows firms to focus on higher-risk transactions.
For small law firms and sole solicitors, the change offers greater clarity and flexibility—but it also requires careful implementation. By updating your AML framework, training your team, and maintaining robust documentation, you can ensure your firm remains compliant and efficient.
References
[1] The Proceeds of Crime (Money Laundering) (Threshold Amount) (Amendment …